Missing Reports

Superintendent Reacts To $4.9M Education Department Fine

April 14, 2013

PANAMA - Paperwork errors, one of which occurred nearly a decade ago, may end up costing the Panama Central School district nearly $5 million over the next 10 years.

According to a press release, the district was informed in November that it was listed on a state aid website as being delinquent in filing final cost reports; and that the state Education Department is imposing a penalty on the district in the form of a $4.9 million fine.

The final cost reports in question were for two building projects that were completed in 2002 and 2005. Bert Lictus, Panama superintendent, said that the projects, which cost approximately $14 million to complete, included the construction of a new bus garage and renovations to the district's main building.

Article Photos

The Panama Central School district is facing a $4.9 million state Education Department fine, which it has 10 years to repay.P-J photo by Gavin Paterniti

After filing certificates of substantial completion to receive building aid from the state, the next forms to be submitted would be the final cost reports, Lictus said.

"It's an accounting of how you spend the taxpayer's money," he said. "If you borrow that much money, (the final cost reports address) if you spent it all, what you spent it on and if you can verify (those things). In November of this year, we were notified by fiscal advisers that Panama was shown as an open project - the state hadn't received these final cost reports. Now they want their aid back."

He added: "This was a clerical oversight that occurred in 2002 and 2005, and it's an awfully stiff penalty for a paperwork issue. How a taxpayer-funded nonprofit organization is expected to pay a fine of this magnitude is, quite frankly, mind-boggling."

According to Lictus, the fine imposed on the district is calculated by the amount of aid that the state had sent for every year that the reports were late. The $4.9 million comes from aid sent by the state for completion of the bus garage since 2004, and the main building renovations since 2007.

"From what I'm finding out, in these situations, there is no notification requirement (of delinquency) on the part of the state," he said.

"While all school districts have the obligation to be fiscally responsible and accountable, and the state should have stringent building project reporting requirements so that no one steals from the taxpayers, sometimes these missing cost reports are a result of simple human error. That seems to be the case for Panama," said state Sen. Cathy Young, R-Olean.

Upon being informed of the issue, the district then completed and filed the forms with the state Education Department under the Amnesty Program provided by the state for delinquent districts, the press release said. In working with the state through Young's office, the district was able to complete the submission of these reports before Dec. 31, which Lictus said helped to mitigate the penalty.

"Had we not filed by Dec. 31, (the state) would have requested 100 percent of the aid back, which is roughly $12 million," he said.

In working with Sen. Young, the district was able to obtain an agreement with the Education Department to spread the payment of the penalty amount over a 10-year period. Due to budget negotiations in Albany last month, the district has been awarded a grant of $500,000 to assist with the first year's payment. Additionally, the district is also in the process of drawing up its 2013-14 budget, which serves to complicate matters.

"It's almost like double taxation. The taxpayers have to pay up $500,000 to pay back the taxpayers," said Lictus. "To assess a penalty like this a few weeks before the district is going to prepare its own spending plans doesn't give us enough time. You can't take $5 million from a school district who's tax levy is only $3.5 million a year. I equate it to getting a parking ticket and ending up in prison."

According to Young, Panama has also received a $335,753 boost to its state aid this year, contributing to a total state aid amount of $7,887,516.

"The Senate fought hard at the budget negotiating table to fully pardon the penalty, but the Assembly speaker (Sheldon Silver) and governor would not agree. Instead, the Senate was successful in convincing them to allow the school to pay the fine over 10 years, the longest time granted in state history. Typically, only three years are given," Young said.

The senator said that it is frustrating when these situations arise, in a prepared statement to The Post-Journal. Fredonia Central School was faced with a similar problem several years ago. Sen. Young passed legislation to help the district three times, and each time it was vetoed by governors.

Panama officials will continue working with Sen. Young's office, and directly with state officials, to lessen the effects that this finding will have on the district, students and community members, according to the press release.

"This is a problem that is serious and real, and it's not going to go away because somebody gets angry," said Lictus. "It's a law, and we have to address that kind of thing. It shouldn't happen but mistakes do happen, and I'm hopeful that that's kind of the mindset of people - that we need to get through it and work together and not just get angry. But I do understand frustration. And, so far, I couldn't have asked for better representation than our local leaders."